Mortgages, Money and Me

Buying your property

You have found the property you want in the location you love… now what?  You need to put your offer to purchase the house in writing. This done via a standard contract form that is normally prepared by the real estate agent.

These are some clauses that you may wish to include in your offer:

  1. Subject to finance:Ideally, you will know the lender you are likely to go with as a result of your discussions with your broker or bank.  Make sure this clause actually does specify a lender or the sellers or agent could force you to go with a lender not of your choice.  The real estate agent may try to push you to have finance approved in 7 days.  This is a very tight timeframe and while not impossible, it is not recommended.  14 days as a minimum is better, and 21 days better still.  You will then have a further period before settlement (where the property ownership changes to you).  Again, 14 days at a minimum, 21 days is better.  If it suits you to have a longer timeframe, by all means- ask for it!
  2. Subject to pest/termite inspection:Some States are more prone to pest infestation than others and you really don’t want to be buying a house that has been structurally compromised though something like termite damage! That said many properties do have prior damage, but providing the infestation has been treated and the damage is non-structural it is normal to proceed with the purchase.
  3. Subject to building inspection:This is an optional clause, but makes good sense.  Make sure that your clause has an exit strategy if you find your building inspection uncovers significant structural damage that you are not prepared to accept. ‘Subject to building inspection’ it itself does not protect you, so make sure you have specific clauses that do!
  4. Nominate a solicitor/conveyancer/settlement agent:While this does not always have to happen at this point, it is a good idea to have your representative nominated as soon as you can to avoid future delays (a settlement agent is often suggested by the real estate agent, but you can use anyone of your choice).

Settlement is the legal process of transferring ownership of the property title from one person to another. It’s recommended you hire a conveyancer to deal with this complex documentation. This happens between the agreement and the settlement date, which will be set in the contract of sale. The settlement period is usually between 30 and 90 days and can sometimes be negotiable.

There may also be other clauses that your real estate agent will suggest.  Make sure that you fully understand what they are. If you are at all uncertain refer the contract to your solicitor or conveyancer prior to signing the contract.

There may be a period of negotiation where the seller rejects your initial offer and counter offers until you both agree on a price.

Check also at this point to see who is responsible for insuring the house prior to settlement.  In most cases it is the person selling the house, but legislation does differ from state to state. Many insurers will provide complimentary insurance for this transition period, so it is well worth checking.

Negotiation tips

Property prices are influenced both by demand and how much other potential buyers are willing to pay. Before you make an offer, research similar properties that have sold recently in the same area. Also consider organising a pre-purchase building report as any issues with the building may give you leverage to negotiate a lower price.

Length of settlement is another factor that can be negotiated.  You may like a longer settlement to give you additional time to save, or if the seller wants a quick settlement then you may be able to accommodate that with a reduced price.

You may also be able to negotiate the clauses around your purchase offer such as the length of time for finance approval, and whether your offer is also subject to the sale of an existing property.

If you have a bank pre-approval this could also strengthen your negotiating power.

Keep calm and carry on!

Play your cards close to your chest and don’t reveal your position.

This includes keeping the maximum amount you’re willing and able to spend confidential. Otherwise, the agent may try to push you closer to your maximum, even if your current offer is a fair one.

If you’re serious about the property, it might be worth making an offer slightly above estimated market value, as long as it is still within your means. But don’t risk significantly overpaying just because you’ve become attached. New properties are being listed all the time, so something else will always come along – and it might even be better.

Most importantly, try to keep your emotions separate from your negotiations. Don’t let competitiveness or fear of losing the property push you past your limit!

Please don’t hesitate to contact me if you have any questions regarding any of these points.